KUALA LUMPUR (Nikkei Markets) -- Malaysia's palm oil inventory rose in September after shrinking for six straight months as exports fell sharply, while output rose, official data Thursday showed.
Stockpile in Malaysia, the world's largest palm oil producer after Indonesia, totaled 2.45 million tons in September, 9.3% higher than 2.24 million tons recorded in August, according to Malaysian Palm Oil Board. Exports slumped 18.8% to 1.41 million tons in September from the previous month.
Analysts said India, the world's biggest importer of vegetable oil, may step up purchases ahead of the Diwali celebration, or the Hindu festival of lights this month amid low stocks in the country after shipments to the South Asian nation fell sharply in September following its decision to raise import tax on Malaysian refined palm oil.
"India may purchase a bit more but should see demand tapering off heading to year-end," said Phillip Futures Analyst David Ng. "We are monitoring China's demand as it may stock up ahead of the winter season."
In terms of markets, shipments to India dropped 44% month-on-month in September, while exports to China fell 25%. Exports to European Union slipped 5.2% during the month.
Demand for palm oil that solidifies in cold weather typically eases during winter months.
Meanwhile, output of the tropical oil used in everything from snacks to cosmetics, is expected to continue rising until October or November before easing towards year-end during monsoon season. Production rose 1.2% to 1.84 million tons in September from a month earlier.
That could depress prices of the commodity which have gained 3.6% so far this year. The most- traded crude palm oil futures for December delivery rose 0.5% on Thursday to 2,206 ringgit a ton on Bursa Malaysia Derivatives.
"Overall, the (inventory) report is seen as neutral on prices, though rising stocks could quickly put downward pressure," said Singapore-based Palm Oil Analytics. Additional data showing lower exports during the first 10 days of October also "presents weakness in the market," it said.
Shares of plantation companies were mostly lower. Sime Darby Plantation, the world's largest palm oil producer by acreage, fell 1.08% to 4.6 ringgit apiece, while the broader Bursa Malaysia Plantation Index closed 0.1% higher and the benchmark FTSE Bursa Malaysia KLCI also ended a tad higher.